Measuring financial exclusion of firms

Gerhard Kling

doi:10.1016/j.frl.2020.101568

Measuring financial exclusion of firms

Gerhard Kling^*

^*Corresponding author for this work

Accountancy & Finance, Finance

Research output: Contribution to journal › Article › peer-review

3 Citations (Scopus)

5 Downloads (Pure)

Abstract

Financial ratios such as leverage or indices based on firm characteristics (KaplanZingales, Whited-Wu, Hadlock-Pierce) have been used to measure whether a firm has too much debt. Let’s assume a firm does not have any debt. Does this ‘choice’ reflect financial strength or exclusion? To measure the latter, this paper develops a theory to estimate the value of financial constraints. Based on a strictly concave production function, firms that face financial constraints take longer to reach their steady-state. This added time diminishes firm value, which translates into a shadow price of relaxing financial constraints.

Original language	English
Article number	101568
Number of pages	5
Journal	Finance Research Letters
Volume	39
Early online date	19 May 2020
DOIs	https://doi.org/10.1016/j.frl.2020.101568
Publication status	Published - Mar 2021

Bibliographical note

Supplementary material associated with this article can be found, in the online version, at 10.1016/j.frl.2020.101568
Supplementary Data S1. Supplementary Raw Research Data. This is open data under the CC BY license http://creativecommons.org/licenses/by/4.0/

Keywords

impulse control
financial contraints
financial exclusion
Financial constraints
Impulse control
Financial exclusion

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© 2020. This manuscript version is made available under the CC-BY-NC-ND 4.0 license http://creativecommons.org/licenses/by-nc-nd/4.0/
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Cite this

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title = "Measuring financial exclusion of firms",

abstract = "Financial ratios such as leverage or indices based on firm characteristics (KaplanZingales, Whited-Wu, Hadlock-Pierce) have been used to measure whether a firm has too much debt. Let{\textquoteright}s assume a firm does not have any debt. Does this {\textquoteleft}choice{\textquoteright} reflect financial strength or exclusion? To measure the latter, this paper develops a theory to estimate the value of financial constraints. Based on a strictly concave production function, firms that face financial constraints take longer to reach their steady-state. This added time diminishes firm value, which translates into a shadow price of relaxing financial constraints.",

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N2 - Financial ratios such as leverage or indices based on firm characteristics (KaplanZingales, Whited-Wu, Hadlock-Pierce) have been used to measure whether a firm has too much debt. Let’s assume a firm does not have any debt. Does this ‘choice’ reflect financial strength or exclusion? To measure the latter, this paper develops a theory to estimate the value of financial constraints. Based on a strictly concave production function, firms that face financial constraints take longer to reach their steady-state. This added time diminishes firm value, which translates into a shadow price of relaxing financial constraints.

AB - Financial ratios such as leverage or indices based on firm characteristics (KaplanZingales, Whited-Wu, Hadlock-Pierce) have been used to measure whether a firm has too much debt. Let’s assume a firm does not have any debt. Does this ‘choice’ reflect financial strength or exclusion? To measure the latter, this paper develops a theory to estimate the value of financial constraints. Based on a strictly concave production function, firms that face financial constraints take longer to reach their steady-state. This added time diminishes firm value, which translates into a shadow price of relaxing financial constraints.

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KW - financial contraints

KW - financial exclusion

KW - Financial constraints

KW - Impulse control

KW - Financial exclusion

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SN - 1544-6123

VL - 39

JO - Finance Research Letters

JF - Finance Research Letters

M1 - 101568

ER -

Measuring financial exclusion of firms

Abstract

Bibliographical note

Keywords

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